Oil Prices Edge Lower Amid OPEC+ Production Adjustments and Surplus Concerns

Key Highlights

Price Movements: Crude oil futures traded slightly lower as Brent and WTI recorded marginal declines, reflecting market concerns over oversupply and weak global demand.

OPEC+ Strategy: The group extended voluntary production cuts until December 2026, phasing out 2.2 million barrels/day reductions gradually from March 2025.

Market Impact: Adjustments by OPEC+ reduce expected 2025 surpluses but do not shift the market into a deficit, leaving a manageable surplus of 500,000 barrels/day in early 2025.

Global Oil News: QatarEnergy revised its January crude oil prices to align with the Oman/Dubai benchmark, reflecting market conditions and maintaining competitive positioning.

Crude Oil Price Trends: Marginal Declines Amid OPEC+ Adjustments

• Crude oil futures traded marginally lower on Friday morning after OPEC+ delayed plans to increase production output by three more months.

• At 9.54 am on Friday, February Brent oil futures were at $72.02, down by 0.10 per cent, and January crude oil futures on WTI (West Texas Intermediate) were at $68.28, down by 0.03 per cent. December crude oil futures were trading at ₹5797 on Multi Commodity Exchange (MCX) during the initial hour of trading on Friday against the previous close of ₹5805, down by 0.14 per cent, and January futures were trading at ₹5787 against the previous close of ₹5798, down by 0.19 per cent.

OPEC+ Strategy: Production Cuts Extended to 2026

• OPEC+ (Organization of the Petroleum Exporting Countries, and allies) countries, which previously announced additional voluntary adjustments in April 2023 and November 2023, held a virtual meeting on the sideline of the 38th OPEC and non-OPEC Ministerial Meeting.

• A media release said the group decided to extend the additional voluntary adjustments of 1.65 million barrels a day that were announced in April 2023, until the end of December 2026.

• Moreover, OPEC+ countries will extend their additional voluntary adjustments of 2.2 million barrels a day that were announced in November 2023, until the end of March 2025 and then the 2.2 million barrels a day adjustment will be gradually phased out on a monthly basis until the end of September 2026 to support market stability, it said. This monthly increase can be paused or reversed subject to market conditions, the statement said.

• The Commodities Daily feed by Warren Patterson, Head of Commodities Strategy of ING Think, said the action taken by OPEC+ eats quite heavily into the surplus that was expected over 2025. However, the extension and the slower return of barrels is not enough to push the market into deficit next year.

• The move still leaves the market in surplus in the first half of 2025, although admittedly the surplus is more manageable at around 500,000 barrels a day compared to 1 million barrels a day expected previously, he said.

Petroleum News: Surplus Reduction Yet Persistent Challenges

• QatarEnergy has announced the official selling prices (OSP) for its marine and land crude oil for January. According to a recently released pricing document, both the marine and land crude oil are priced at the Oman/Dubai benchmark plus $0.15 per barrel.

• This pricing strategy reflects Qatar's continued efforts to maintain competitive pricing in the global oil market. The adjustment aims to align Qatar's crude oil prices with current market conditions, ensuring its oil remains an attractive option for international buyers.

• The decision comes amid fluctuating global oil prices, where adjustments are often necessary to stay aligned with market dynamics. Qatar's commitment to transparency in pricing aids in strengthening its position as a leading energy supplier.

• The Organization of the Petroleum Exporting Countries and its allies on Thursday pushed back the start of oil output rises by three months until April and extended the full unwinding of cuts by a year until the end of 2026.

• The group, known as OPEC+ and responsible for about half of the world's oil output, was planning to start unwinding cuts from October 2024, but a slowdown in global demand - especially in China - and rising output elsewhere have forced it to postpone the plan several times.

Expert Opinion: Competitive Alignment in Global Oil Markets

Sidelining the surprise drawdown in US crude stockpiles last week and OPEC+ extending plans to ramp up output until September 2026, oil prices eased further amid growing concerns over dented global demand and oversupplied markets. With growing concerns over global demand for oil in 2025, even the softening of the US Dollar in the last couple of sessions doesn’t seem to mend the floor beneath oil prices. However, concerns that supply will still outstrip demand even going into next year weighed on prices further.